Progress has been slow towards achieving energy access for all as enumerated by Sustainable Development Goal 7. According to the Energy Access Outlook 2017, 1.1 billion people have no access to electricity, with 2.8 billion people lacking access to clean cooking facilities. However, it is possible to turn the tide in Africa by adopting decentralized renewable solutions to connect them to electricity with off-grid technologies providing access to 55 million homes.
Off-grid solar is often overlooked in energy access, development planning and financing. Only a quarter of governments in ’access deficit’ countries have strong regulatory frameworks for off-grid solar solutions in their energy access plans, and only US$1 out of every US$1,000 invested into sustainable energy is spent on off-grid solutions.
In countries where a supportive environment has enabled the industry to grow, off-grid solar is already enhancing lives, by replacing dangerous kerosene lanterns and candles as well as providing access to services such as phone charging, television and productive-use appliances.
Although a rapid expansion of the off-grid solar market was initially driven by solar lantern sales between 2013 and 2017, innovation in multiple-light kits and solar home systems enabled sustained market growth for products offering capacities beyond lighting. These products now represent a quarter of annual volumes.
The growth of the solar home system (SHS) segment has largely been driven by Pay-as-you-go (PAYG) business models that are responsible for the growth of sales volumes that grew at an average annual rate of 140% between 2013 and 2016 to reach 80% of solar home systems sold in 2016. With PAYG, customers pay for their system or service in instalments, allowing them to access previously unobtainable technology and energy solutions.
In an enhanced effort to continue reaching the rural poor and supporting growth through the energy ladder, AECF has commenced financing distribution of both solar lanterns and solar home systems in Ethiopia.
Ethiopia is a unique market, with established micro-finance institutions (MFIs) in nearly all the regions - implying that 102 million people can potentially have easy access to solar and other renewable energy products through grassroots financial institutions that provide affordable customer financing. Nonetheless, this is not the case as the capacity of MFIs to procure and distribute solar products is limited due to challenges that include inadequacy of capital; unavailability of skilled staff to market the products; inability to verify product quality; limited access to mobile money payment services and market saturation with cheap and low quality products. These challenges are set to improve with the launch of mobile money services, M-PESA, in the Ethiopian market. Thus accessibility and affordability are soon expected to be within the reach of rural households.
Ultimately, AECF funding through the Renewable Energy and Adaptation to Climate Technologies sub-Saharan Africa (REACT SSA) Ethiopia competition programe will provide catalytic financing, technical assistance to private sector companies to accelerate access to renewable products and services to rural and peri urban markets. The competition will be launch on 26th July 2018 and closes on 7th September 2018. For more information on how to apply go to https://www.aecfafrica.org/portfolio/renewable_energy/react_ssa and click on Ethiopia.
By Victor Ndiege, REACT Sector Lead